RIM's China Move Could Catalyze Mainland 3G Rollout - InformationWeek

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RIM's China Move Could Catalyze Mainland 3G Rollout

With close to half-a-billion mobile phone users, China has for years represented a huge potential market for smartphone makers and providers of mobile e-mail services.

The news that Research In Motion, after years of trying, has finally won government approval to begin selling BlackBerry devices and mobile e-mail service in China helped push the company's share price up almost 4% on Thursday.

It may also help push forward the deployment of third-generation data networks in the People's Republic, which has delayed the licensing of 3G services on the mainland for four years.

RIM co-chairman Jim Balsillie said in the BlackBerry maker's quarterly earnings conference call last week that the company is "finalizing delivery availability in the mainland." Service and sales will apparently begin in the major cities including Beijing, Shanghai, and Guangzhou.

With close to half-a-billion mobile phone users, China has for years represented a huge potential market for smartphone makers and providers of mobile e-mail services. RIM, facing increased competition in its core markets of North America and Western Europe, looks to the mainland to continue its impressive growth. The company said last week it had added 1.2 million BlackBerry subscribers to move beyond 9 million total, pushing quarterly revenue above $1 billion for the first time.

The Associated Press reported that RIM will begin selling the relatively dated BlackBerry 8700g in China by the end of August. That would not only satisfy Chinese businesspeople and expatriates who covet mobile e-mail service on the mainland; it could also help force along the government's snail's-pace progress toward licensing 3G networks that have long been promised before the Beijing Olympic Games, in August 2008.

That would be big news for Western telecom equipment makers who have placed big bets, in the form of partnerships with mainland operators and suppliers, on the 3G rollout in the People's Republic. The payoff could be network investment of as much as $75 billion in the next five years, according to Deutsche Bank AG.

In February 2006 the government released a timeline for the deployment of the networks that called for trials to be complete by a year ago. Earlier this year, the PRC's state-controlled media reported that those trials will extend into the fourth quarter of this year.

One potential sticking point is that, unlike other countries, China is relying on a homegrown version of 3G known as Time Division Synchronous Code Division Multiple Access (TD-SCDMA), which was developed by the Chinese Academy of Telecommunications Technology. China's Ministry of Information Industry set TD-SCDMA as a national standard in January 2006.

Now, the launch of BlackBerry in the world's largest mobile telephony market could jump-start China's efforts to get its national 3G infrastructure off the ground, said Carmi Levy, senior VP for strategic consulting at AR Communications.

"Because the demand for beyond-voice services hasn't been sufficiently strong to date, the government's been able to quietly take its time to get all the pieces in place," Levy explains. "Large-scale availability of BlackBerry devices and related services will finally put pressure on the government to get it done."

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